G eneral Motors may well have put an informal price-tag on the majority stake in Opel-Vauxhall it wishes to sell. But nominal prices don’t matter much in a recession. The US auto maker is seeking a E500m equity investment in its European arm from the would-be buyer of its controlling stake, according to the Financial Times.
But however much GM behaves like it is in the driving seat, it probably won’t have much say in the final deal. The German government - which stands ready to guarantee E3.3bn worth of loans to Opel - will call the shots once a serious buyer is found. GM says there are more than half a dozen potential acquirers for Opel.
Most of those seem to be financial investors. The few industrial buyers out there are doubtless mainly interested in peering into a competitor’s books.
It's easy to see why teaming up with a fund would appeal to GM. The struggling carmaker needs to retain strong industrial ties with Opel, which is home of most of GM’s expertise in fuel-efficient and smaller cars. The new majority investor would be expected to do what GM has failed doing in the last few years – extract concessions from the company’s unions and aid from the government.
Germany’s political climate currently makes it almost certain that Opel will survive as a car company for the foreseeable future. The carmaker’s troubles will be a hot topic in September’s general election. Frank-Walter Steinmeier, the social-democratic candidate, just launched his campaign by demanding that the government in which he serves as foreign minister does “everything in its power” to save Opel.
Nevertheless, a private-equity fund seeking involvement with Opel should expect harsh scrutiny in a country where financial investors were once likened to “locusts” by one government minister. The state’s loan guarantees will come with strings – such as restrictions on factory closures and job cuts. These will weigh on profitability and make any incoming investor wary of the size of equity commitment given the need to make a decent return. The tag is up, but don’t expect Opel to go at catalogue price.